Beyond the regulator May 6, 2014

A timely analysis here from John McManus of the Irish Times who underscores the point that for all the anger directed at the Financial Regulator for a most curious approach taken during the Anglo situation, as noted here and before more blame accrues to those in politics who established the framework within which the Regulator operated.

And who would they be?

The immediate parents of principles-based regulation in Ireland were Charlie McCreevy and Mary Harney. They were respectively the minister for finance and the minister for enterprise when the Irish Financial Services Regulatory Authority came into being in 2003.

And:

The decision to create a new regulator had its origins in a report by a group chaired by Michael McDowell, who was taking one his periodic breaks from politics at the time.

And:

All three would have been very much of the “markets know best” school of thought when it came to economics and about as close as Ireland ever came to having political evangelists for free markets and unfettered capitalism.

Why, of course!

Good though to see someone pointing the finger in the right direction. It’s also worth noting that there can be something of an evasionary aspect the current rhetoric about the Regulator – and note that in comments online about the issue it feeds right into a ‘blame the public sector discourse’. Expedient indeed for those who would like to ignore the centrality of what McManus describes above to the political project that birthed the Regulator in a form where – supine or not, the office apparently was shorn of much that would lend it effective authority let alone agency.

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If one is schooled in neoclassical economics one believes that the market is a self-regulating mechanism; the invisible hand is the regulator. And there is no need for a Regulator. But as Joseph Stiglitz has pointed out the reason the invisible hand is invisible is because it does not exist. In Ireland, as elsewhere, ideology won out over reality, and the working class is paying for the resulting mess.